Investments Trade Log

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ertyu
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Re: Investments Trade Log

Post by ertyu »

Lemur wrote:
Fri Apr 10, 2020 4:04 am
Q2 / Q3 earnings reports are going to be devastating.
The unemployment numbers were devastating and they just kept printing through it. What stops them from printing through earnings season? I don't argue that economic fundamentals are shitty and that there is a severe mismatch between valuations and fundamentals. But they can make valuations whatever they want. This market is a function of the fed's balance sheet and of opex/dealer gamma hedging. We're a long way away from Kansas, even if our brains want to cling to a sense of normalcy in how the market "should" work. If the market worked how it should work, valuations would have gone down long, long ago.

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Lemur
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Re: Investments Trade Log

Post by Lemur »

@ertyu

We're too narrow and short-term focused. Market valuations will always return to the mean....eventually. And right now what the Federal Reserve is doing is just creating the largest equity asset bubble ever and JPOW is just bending to Trumps will it seems.

1.) https://www.gurufocus.com/stock-market-valuations.php [Total Market Capitalization / GDP = 128.6%]
2.) https://www.multpl.com/shiller-pe [Currently 26.16, mean is ~17]

So we've two big indicators here showing that the market as it stands right now is significantly overvalued ....and this is even after the stimulus is "Priced In" and we have not even seen Q2/Q3 earnings report. Unemployment will rise and the people will catch on. These won't keep being ignored.

The chickens have come home to roost eventually. What scares me the most is how the Federal Reserve is delaying the natural business cycle. For a real recovery to happen, you need the poor fundamentally run businesses to fall off the indexes. But they're all being propped up, bailed out, and kept on a ventilator. No amount of printing is going to keep these companies alive forever.

But of course...maybe I'm just dead wrong and the bottom is here, but I'm absolutely willing to trade away upside to stay on the sidelines for a bit. My bearish sentiment is not ending until after the virus is over and earnings report begin reversing course. I don't think that is going to happen in 2020. Until then, its all a bull trap to me.

ertyu
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Re: Investments Trade Log

Post by ertyu »

Thesis: the printing will continue until 2030, when the boomer cohort will have thinned out. Pensions are underfunded. If the US wants to actually be able to pay pension entitlements, they need to deliver the 8% return the pension funds are built around. Somehow.
Even if the value of said entitlements might get shakier over time.

Do you think they're capable of keeping this charade up for another 10 yrs? Because I think they are.

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Lemur
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Re: Investments Trade Log

Post by Lemur »

@ertyu

Oh absolutely....the charade can last a long-time. I can't imagine a scenario anytime soon where the Fed would need to raise interest rates.The only 100% idea I'm certain is about is that 90% of the material I learned for my Masters in Finance degree was useless lol. I don't think this changes the fact that I still see a bull trap in the short-term.

ertyu
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Re: Investments Trade Log

Post by ertyu »

Lemur wrote:
Fri Apr 10, 2020 6:39 am
@ertyu
I don't think this changes the fact that I still see a bull trap in the short-term.
from your lips to god's ears, man.

zork97
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Re: Investments Trade Log

Post by zork97 »

Lemur wrote:
Fri Apr 10, 2020 4:04 am

Not sure I understand the bullish sentiment here....S&P 500 is now at beginning 2019 levels with the recent run-up. The FED announced its stimulus literally at the same time of the jobs reports....Q2 / Q3 earnings reports are going to be devastating. We're just getting started with this Bear market. No way this is over yet...I am of the opinion you might be looking at the largest bull trap ever in stock market history. I'm not buying this rally at all. I know its time to continue being a bear when random friends on my Facebook who've never invested before are saying its time to buy and they're posting referral links to RobinHood. That to me is a signal...
I realized this a little late and bought in some equity trying to catch a falling knife . My random friends too have started looking to make a fast buck by buying anything out there today and exiting in 2021 . I am going back to sitting on the sidelines now.

Lucky C
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Re: Investments Trade Log

Post by Lucky C »

If the market goes on to set new highs this year, it will be the most obvious V-shaped "don't fight the Fed" recovery from the most obvious buy-the-dip opportunity ever. If the market goes on to set new lows it will be the most obviously predictable (continued) crash with this month (probably) being the most obvious opportunity to exit at close to record high valuations ever.

Right now my brain certainly thinks one scenario is much more likely than the other, but in terms of cold hard data it is less clear (based on what seems to actually matter) which way things are going to go. Yes, the economic data paints an extremely negative picture, but further significant gains in market prices (at least in the short term) are certainly not impossible. I expect it won't take long, maybe only a few weeks, to get a clearer picture as to what's going on. Of course by the time the bull case or bear case becomes "obvious", prices will have moved significantly from the current purgatory and further movements in the same direction may be limited.

Gold on the other hand has been giving a much more consistent positive signal, so I've just been letting that allocation grow.

ertyu
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Re: Investments Trade Log

Post by ertyu »

@Lucky, exactly the same thinking here. thus thinking if i want to sell itm options and buy the next strike after to ensure i'll participate in the tails. As for gold, I'm worried I missed it. I'm worried everyone's crowded into it now the way they were into treasuries in august. I missed loading up on gold, and i am afraid to chase here. But then, if what half of fintwit says is true, chasing might be the difference between buying spx at 900 or 1050 way back when. Rode up 15%, you feel you missed it, just that over the next 10 years it went up 350%. Hard to decide what to do here, the analysis paralysis is strong.

ToFI
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Re: Investments Trade Log

Post by ToFI »

@ertyu
That's the issue of market timing. My strategy is I don't get in and out of market for the majority of my portfolio. It remains long term investment that I don't try to sell them before the next big crash.

@Lemur

Look at Italy, before the virus, its economy was in a much worse shape than US. Its stock market bottomed after 40% drop. It's not unreasonable to say US bottomed after 35% drop.

The speed of recent crash is reflection of the virus's speed of spreading. Initially, the virus was doubling every 3 days. The market panicked. As soon as it realized the virus can be contained, it bottomed. In normal bear market, it bottoms in few months. This time, the whole process is condensed into few weeks. The faster it drops, the faster it rises. Where does the index goes from now depends on individual company's earning performance. Some companies earning will not go down. No more indiscriminating selling from Index/mutual funds. e.g. rich doctors converted index ETF to cash.

Yes, unemployment numbers will be bad but governments are helping. Canada is giving $2000 per month for few months. Most of those job loss are short term. As soon as lock down is gradually lifted, they will come back. We might going to have a slight labour shortage because of some deaths. Not all deaths are old retired people. But it'll be less severe than 1918 labour shortage where many young people died. The global containment effort is also a lot better this time than 1918. We don't have a distraction of world war. The total spread will be much limited.

Lucky C
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Re: Investments Trade Log

Post by Lucky C »

Well if you look at pretty much any rules-based trading system based on price movements and apply the system to gold prices (though they may not be intended for use with gold prices), they would probably all tell you that you should be buying/holding gold - until the trend reverses and the rule tells you to sell it. With SPX on the other hand, most (possibly all the popular) rules-based trading systems would be telling you to sell currently, however depending on the rule the signal is not that strong with the recent advance and it may change by the end of the month when many trend-followers execute/rebalance.

In terms of valuation, gold is possibly (probably?) overvalued based on its historical trend, and it may only be expected to keep up with inflation over the next decade or so, or maybe not even keep up with inflation if it mean-reverts. If you wanted to hold on to some form of money for a decade, you might be much better off with an unpopular emerging market currency.

giskard
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Re: Investments Trade Log

Post by giskard »

ertyu wrote:
Thu Apr 09, 2020 3:25 pm
Nicely done, giskard! Any worries that the gold trade is getting too crowded? I keep thinking it's not the right time, but maybe I missed the right time. They just keep printing...
I don't think so, I still see a lot of people (especially traders and economists) predicting deflation and saying gold will go down. They might be right, 2 months or 3 months from now gold might go down and we might see a lot of deflation in the short term.

But long term the economy is so levered, can it handle deflation? If we see deflation the government will respond and stop it. The response will have to be to do even more fiscal stimulus and QE. E.g. what if earnings crater and we get a slow recovery? More stimulus. What if the virus goes on longer? More stimulus. What if companies start to default on their debts? More QE. What if the entire oil industry goes bankrupt? Probably bailouts and QE, right? The response to every thing is to do QE or stimulus.

George the original one
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Re: Investments Trade Log

Post by George the original one »

I forgot markets are closed in the USA for Good Friday. Sigh.

Seppia
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Re: Investments Trade Log

Post by Seppia »

jacob wrote:
Thu Apr 09, 2020 8:45 pm
Understanding the market psychology is objectively difficult but not impossible. The index cult does have a strategy that is in complete accordance with their beliefs: They understand themselves and insist that the market cannot be understood, so they refuse to do battle. This is wise. Learning the enemy takes time and talent. Whether this succeeds or not is not random luck but the split accounts for the other two categories.
For as much as I do not identify with the index ayatollahs, I've always found the "if it weren't for the Fed/markets are rigged" crowd to sound much more stupid.
At least the first bunch knows they don't now.

I know I don't now and I like to take educated guesses.
Recently, I've lost all the advantage I had VS straight indexing*, and I'm probably a bit below.

*which was minimal to begin with, like 7% since 2015 or so when I started tracking

slowtraveler
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Re: Investments Trade Log

Post by slowtraveler »

I straight up bought 489/500 index components in equal weight yesterday as an experiment in indexing. No turnover, hold everything to the end to test Bogle's hypothesis that lower turnover is better. Siegel's work indicates it will outperform by .5-1.5% per annum in the long run before the substantial tax benefit.

I'm finishing the last 11 and adding in removed foreign blue chips and a few other foreign blue chips Monday. The only reason I hadn't done it all yesterday is that some cash took until market close to clear.

Also, I'll be moving about 7% of my portfolio back into Wellesley with the recent market run up as a secondary emergency fund beyond my few months of expenses saved in case I'm wrong about all this being an overreaction.

jacob
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Re: Investments Trade Log

Post by jacob »

@slowtraveller - I'm curious how you implemented that? Did you straight up execute 489 trades entering them manually or was there some trick to it? All market orders or ITM limits? It's actually kinda cool that widespread zero commissions make this type of quant strategies viable. Paperwork might be hell at tax time though unless it was a tax deferred acct.

slowtraveler
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Re: Investments Trade Log

Post by slowtraveler »

I went to this site*, as it seemed the most updated and it reflected the Macy's drop and the Raytheon-United Technologies merger the most quickly of the lists I found. I copied it into Excel and removed the voting rights (more expensive) shares of the 5 companies with multiple shares classes.

The brokerage I chose for this experiment allows fractional share trading. You can buy a dollar or share amount of the stock. I divided my cash by around 505-510, and bought that dollar amount of each company manually as a market order. All executed immediately and at a price close to the quote I saw. The amount of cash deducted per trade was always at or slightly below (<.5%) the dollar amount I requested. It took about 3 hours manually. I made 1 mistake in being off by a letter in a ticker that I'll fix Tuesday to avoid a round trip good faith violation. I'll also be buying about a dollar of the in house, no minimum, low fee, S&P 500 fund to have a clear comparison upon aquiring the last shares.

I found a few peculiarities in the S&P list vs Vangaurd's list. Like Trane Technologies, I couldn't find it in VOO (Vanguard S&P 500 etf) but it was on both slickcharts and Wikipedia's S&P 500 list. Do you know anything about why this is? Maybe it has to do with the float adjustment. I couldn't find out and Google didn't help much.

I'm buying and holding so just dividends or privatizations will be taxable but the brokerage should put it all on a form to make it simple to upload into tax software at tax time.

If this works out, I'm leaving index funds and direct indexing in equal weight for most of my wealth. The concentration in float adjusted, market cap weighted index funds is too much for me and likely to lower returns. This is much more diversified. If I find it useful but feel large caps are more stable and will outperform, I'll repeat but for the top 100 or so.

* https://www.slickcharts.com/sp500

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Re: Investments Trade Log

Post by jacob »

Often index ETFs will note somewhere in the prospectus that the goal is to track the index and not necessarily own the components. Some do this with futures and a large cash position. Others hold the components or most of them. Whichever is easier to execute for the trading division of the respective index fund. The tracking-error is reflective of how much they're off. The goal is to make it 0.00% and this may strangely be easier by not trying to own all the components in perfect proportion.

slowtraveler
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Re: Investments Trade Log

Post by slowtraveler »

That makes sense, I was worried I got an inaccurate list from slickcharts but none of the other sources I found reflected updates as quickly and the samples I cross referenced with Wikipedia all supported slickcharts being accurate.

Lucky C
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Re: Investments Trade Log

Post by Lucky C »

This page tracks S&P500 ETF tracking errors though only YTD. So far VOO has the lowest tracking error at 0.03% and SPY has a tracking error of 0.15%, but the way things have gone this year the error is working in the ETF holder's favor.
https://www.advisorperspectives.com/dsh ... rch-update

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Re: Investments Trade Log

Post by jacob »

https://www.reuters.com/article/us-glob ... SKCN21U0J6

OPEC caves. Reduces world oil supply by 10%. The lockdown has caused demand to fall by as much as 1/3 with prices down 60%. The first shale company (Whiting) has declared bankruptcy already with other operations hiring debt advisors. Shale operations are heavily [junk] debt funded and need a oil price around $70+ to stay above water.

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